What is bankruptcy? 

If an individual or organisation is unable to repay debts, bankruptcy offers an alternative in the form of a clean slate. It may involve paying debts off by using assets. There are various types and it is a legal status that is declared by a judge. Ultimately, it may lead to a better financial future. 

Filing is something that should be done after thoroughly weighing options.  

What are the pros? 

Filing for bankruptcy provides some breathing room to enable one to regroup and figure out a way ahead. With the assistance of a trustee, you are able to work out a new plan and to find new ways of managing your finances. 

Creditors can’t call you during the process. When a judge issues automatic stay, then they are legally bound to desist from calling you.  

The other assets to your name may be sold to raise enough money to pay your creditors. In some cases you may be able to find ways to keep your car, home and the money in your bank account. This process will be overseen by a trustee, so everything should be legitimate and legal.  

Enables you to maintain a certain baseline for your life. By starting all over again, you are able to pay creditors. 

What are the cons of filing for bankruptcy? 

It’s an ongoing process. 

There are long term ramifications. It stays on your credit report for up to a decade. This will affect your future credit applications. 

Re-establishing credit may be a slow process as this will taint your record. 

You will be charged higher interest rates as a result.